A - Z TO BUYING YOUR FIRST HOME KAREN HESSE EVERYTHING YOU NEED TO KNOW ABOUT A MORTGAGE A MUST-READ FOR ALL FIRST TIME BUYERS!

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1 TO BUYING YOUR FIRST HOME A MUST-READ FOR ALL FIRST TIME BUYERS! EVERYTHING YOU NEED TO KNOW ABOUT A MORTGAGE But didn t know who to ask! LEARN THE LINGO WITH OUR A - Z JARGON BUSTER! KAREN HESSE OF HOUSE AND HOME MAGAZINE shares her top tips to finding the ideal home

2 Contents 10 Steps to buying your first home 2 Step 1 The bigger the deposit the better 3 Step 2 Budget before you buy 3 Step 3 Find the mortgage that is right for you 4 Step 4 What you need to know about mortgages 5 Step 5 Get your paperwork in order 5 Step 6 Get an agreement in principle 6 Step 7 Going House-hunting 6 Step 8 Making an offer 6 Step 9 Get all your ducks in a row 7 Step 10 Call in the legal eagles 7 Jargon Buster 8 House-hunting Tips 10 1The rules on the amount you can borrow have changed with different finance levels available depending on your situation. You can get up to 92% of the value of the house with EBS, but as a general rule you ll need to budget for around 10 steps to buying your first home 10% of the purchase price to cover a deposit and additional costs. If you are borrowing more Buying your first home is the beginning of a great adventure. As it's your first than 400,000 EBS will offer a maximum of 85% time around, it may seem a bit daunting - so, we've tried to make things a little finance with 75% available for one bedroom clearer for you by taking you through the whole process in our latest edition of apartments, so the amount of deposit needed can vary. Some financial institutions offer savings '10 Steps to Buying Your First Home'. accounts, like the ones we offer here at EBS, that As we all know, the Irish economy and the mortgage market have been you can use to save towards your deposit. through many changes and challenges over recent years. With so much change, it s sometimes hard to keep track of the steps you need to take when buying your first home. The good news for first time buyers is that house prices have fallen considerably over the past few years, meaning you get a little more for your money. On the other hand, reduced income levels and increased taxes have put pressure on people trying to raise finance for a new home. In a nutshell, there s now a whole new set of rules for buying your first home. That s why we ve put together this handy guide packed with helpful advice and information. Because at EBS, we want your first buying experience to be exciting and memorable for all the right reasons. The bigger the deposit the better 2Budget before you buy Do some number crunching before you go looking for a mortgage. There are lots of on-line calculators to help you do this just like the one on First work out your income versus your outgoings. This will give you a good idea of how much you can comfortably afford to spend on monthly mortgage repayments. Remember to factor in unplanned expenses, for example if your boiler goes on the blink or the car breaks down. That s why, as a homeowner, it s always good to have an emergency savings pot to dip into when you need to. You should also consider what would happen if circumstances were to change such as a rise in interest rates, planning a family, illness or redundancy Other costs you may have to allow for when you re buying; Valuation fees for a report on your house, which is given to your lender. Legal fees to your solicitor. Stamp Duty. Log onto for the latest rules on stamp duty. Surveyor fees to look over the house before you buy. Repairs, decoration and furnishings Steps to Buying Your First Home 10 Steps to Buying Your First Home 3

3 3Find the mortgage that is right for you Although you can wait until you've saved a deposit before ever starting to enquire about a mortgage, EBS mortgage advisors are there to talk you through everything from the start. They can give you lots of good advice about everything from getting your deposit together to getting your paperwork in order. When applying for a mortgage at EBS, there are a number of factors which we consider to ensure the loan is suitable for you. Your income - EBS will consider your annual income. We will ask you to provide evidence of a sustainable income pattern. Your age and number of years left to retirement. Outstanding loans repayments - these may include car loan, personal loan or credit card. Other monthly outgoings - these may include household costs, childcare costs, travel cost, etc. Credit history - this shows your repayment history on existing or previous loans. Savings - this shows you have the ability to save on a regular basis and that you have built up a sufficient deposit. The value of your new home - this is the market value or purchase price of your property. The amount you need to borrow - this is the difference between the amount you have yourself to put towards the purchase and the purchase price of the property. EBS will assess whether you can sustain the monthly mortgage repayment based on your current income and financial commitments, even in a period of higher interest rates. EBS will also assess whether you have sufficient remaining income after the mortgage repayment is made every month. 4What you need to know about mortgages... Rate - This represents how much you ll be paying in interest each month for your home loan. There are two basic types of rate: fixed and variable. Fixed - The interest rate is fixed for a period of time. Once the term is up, you may be offered a new fixed rate or be moved on to a variable rate. Variable - the interest rate can be varied by the lender from time to time. Split - some lenders will allow you to split your mortgage between fixed and variable rates. Term - The term of a mortgage is the length of time it will take you to pay your loan off. Usually, the term varies from 10 years up to 35 years. The longer the term, the less you pay each month. But a longer term also means paying more interest over the lifetime of the loan.. Lending criteria, terms and conditions apply. CHECK-OUT OUR Get your paperwork 5in order Speed things up and get all the documents you ll need in one place. Check out our handy checklist on page 14. For PAYE Employees Current photo ID (passport or drivers license) Proof of address (gas/esb bill) within last 3 months P60 or 3 months worth of up to date pay slips Certificate of income from your employer Bank statements going back 6 months for any savings, investment or loan accounts For Self-Employed Photo ID (passport or drivers license) Proof of address (gas/esb bill) last 3 months 3 years audited accounts verifying your income A - Z JARGON BUSTER ON PAGE 7 Confirmation of tax position from your accountant Minimum 6 months recent bank statements for any borrowings, or other accounts held 4 10 Steps to Buying Your First Home 10 Steps to Buying Your First Home 5

4 6Get an agreement in principle EBS would recommend that when starting out in this process before you go house hunting you get an agreement in principle. Be aware that this agreement may only last a few months so it's a good idea to keep in touch regularly with your lender. This means you have an indication of how much you want to borrow before you head off house hunting. EBS can provide you with an agreement providing you with this information. Going House-hunting 7Decide what is important for you in a new home and then do your research. Register with estate agents, keep an eye on the newspapers and surf the net. And, it s back to the mantra of location, location, location. It s no longer just about getting your foot on the property ladder - you really need to be sure that your first property is one you ll be happy living in for the medium or possibly long term. See page 10 for some top house-hunting tips from the Karen Hesse, Editor of Ireland s favourite interior magazine, House and Home. 8 9Get Making an offer The good news is it s a buyer s market so don t be afraid to haggle. And, as a first time buyer, you re even more attractive to a seller because you re not in a chain waiting to sell an existing property. So, you can offer a speedy completion date instead of a higher price. And, remember, don t blow the budget! all your ducks in a row Once your offer has been accepted, you can contact your lender to move from Approval in Principle to Full Loan Approval. To do this, your lender will send a valuer to look at the property, you will be required to cover this cost. If you re buying a second-hand property, it s always advisable to get a more comprehensive survey done to make sure the property is structurally sound and in good condition. This is also a good time to look into house insurance and life cover to avoid delays later on. 10Call in the legal eagles To look after all the legal aspects, you will need to employ a solicitor. Both your solicitor and lender will work closely together to complete the deal on your behalf. When everything is in order, you re ready to 'exchange contracts'. The lender will send your solicitor the loan cheque to pass onto the seller s solicitor to complete the deal. And, the keys are yours! 6 10 Steps to Buying Your First Home 10 Steps to Buying Your First Home 7

5 A - Z JARGON BUSTER We ve put together a jargon buster to help explain some of the terms you may come across when buying your first home. Annualised Percentage Rate (APR) This is a comparative measure to help you identify the true cost of borrowing and to give you a way of comparing the true cost of different types of loan on an annual basis, as it includes the rate, the way the rate is applied and any other fees and charges. Annuity Mortgage This is another term for a standard capital and interest repayment mortgage. Arrears Mortgage repayments which have not been made as they have fallen due Auction A public sale in which property is sold to the highest bidder. BER A BER is similar to the energy label for a household electrical appliance like your fridge. The label has a scale of A-G. A-rated homes are the most energy efficient and G the least efficient. Capital The amount you owe excluding costs and interest outstanding. Also referred to as the principal of the loan. Collateral/Security Security for repayment of the debt. The property, which can be sold to repay the loan if you do not keep up the mortgage payments Conveyancing The practice of arranging the necessary legal work in transferring the ownership of a property. A solicitor usually looks after this. Deeds A document, which verifies the legal ownership of a property. A legal document, which is signed by both the vendor and the purchaser transferring ownership. This document is registered as evidence of ownership. Deposit A sum of money paid to an agent of the vendor by the purchaser when an offer to purchase is made. Two deposits may be payable: 1 - A booking deposit (this is refundable), 2 - The amount paid to secure your property. You normally have 21 days after paying this deposit before signing the contract. (This is generally referred to as the cooling off period). Disbursements (conveyancing and outlay) The costs your solicitor has to pay to carry out their work such as searches, Registration fee, photocopying, postage and couriers. They, in turn, will charge you. ECB The European Central Bank which governs monetary policy for members states of the Eurozone, decides interest rates for the Eurozone on a monthly basis. Equity The difference between the price for which a home could be sold and the total debts registered against the home. Equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity. Insurances There are three main type of insurances associated with a mortgage. They are: A. Life Assurance This is compulsory if you are taking out a mortgage. There are two main types of life assurance; Mortgage Protection: This means the amount outstanding on your home loan will be repaid in the event of your death. The amount that is paid out reduces in line with your mortgage over the years. Term Assurance: This is life assurance that does not reduce during the term of the loan. In the event of death, the mortgage is repaid and the rest of the money goes into the estate. B. House Insurance This is also compulsory for those taking out a mortgage. This insures you against damage to your home, up to and including rebuilding your home should it be destroyed. C. Mortgage Payment Protection This form of insurance is not compulsory. If you cannot work because of an accident, illness or because you have been made redundant, this policy will cover the repayments on your mortgage (and more if you wish) for a period of time, usually up to 12 months. Interest This is simply the cost of borrowing money. If the interest rate was 10% per annum and you borrowed 100 for a year, the interest payable would be 10. Another way of saying this is that the cost of borrowing 100 for a year is 10. Interest rates can be either: A. Fixed A loan where the payments are based on a constant interest rate for a set period of time. B. Variable This means that the interest rate charged on the mortgage can go up and down over the term of the mortgage. Interim Interest As soon as you draw down your loan, interest begins to accrue. However, the first mortgage payment only falls due on the following month. The interest that accrues between you receiving the money and the first repayment is known as interim interest. Irish Credit Bureau A credit reference agency that maintains a database of an individual s credit history. Under the data protection act everyone is entitled to obtain a copy of the information they hold. Land Registry fee A fee paid to the Land Registry to update an entry in their records after you buy your home. This fee will be included in the legal costs charged by your solicitor. Loan to Value (LTV) The amount you wish to borrow expressed as a percentage of the value of the property. Loan Offer Letter Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions. Maturity Date The last day of the term of the mortgage agreement. On the day the mortgage loan must be paid in full or the agreement renewed. Mortgage Has a specific meaning in law but has come to mean a loan secured by property. Negative Equity When the value of the property has fallen to a point where it is worth less than the loan secured on it. Principal The amount of the loan on which interest is calculated (also referred to as the Capital). Repayment The amount due to be paid each month on your mortgage. Searches Searches are carried out by your solicitor on all properties to ensure that the person selling the property has a legal right to sell it and that there is no other interest shown on the title. Stamp Duty A government tax which is charged on some properties. Structural Survey A full inspection of a property to check that it is structurally sound. Title Deeds/Title Documents The legal documents, which provides proof of ownership of a property. TRS (tax relief at source) An individual can claim tax relief on interest paid on monies borrowed for the purpose of the purchase, repair, development, or improvement of their principle private residence. Title (freehold or leasehold) Legal possession. A freehold title gives the holder ownership of land and buildings for an indefinite period of time. A leasehold title gives the holder a right to use and occupy land and buildings for a defined period of time. In a leasehold arrangement, actual ownership of the land, sometimes along with the buildings, remains with the landlord. Valuation An inspection, carried out by a qualified Valuer, for the benefit of the mortgage lender to see if the property will provide good security for a loan. This is not a structural survey - see above. Vendor The person(s)/developers from whom you are buying you new home or investment property Steps to Buying Your First Home 10 Steps to Buying Your First Home 9

6 HOUSE-HUNTING TIPS Always know what you want - and don t want Write a checklist of what you expect from your first home and bring it with you every time you view a property. Some of the things you should ask yourself when doing your list are: Karen Hesse, of Ireland's favourite interior magazine, House and Home, shares her top tips on finding the ideal home House or apartment? New or second-hand? Do you want to live close to your work, family and friends? How important is parking? And, what about shops, restaurants, leisure facilities? List 10 important features in order and decide which ones you could live without e.g. garage, south facing garden, number of bedrooms, etc. Plan your trips Make the most of your time by viewing properties close to each other. Confirm the appointment and get the name and phone number of the person showing you the property. If you re seeing a lot of places, it s easy to get confused - so take notes, measurements and pictures/video to help you with your decisions later. When viewing houses, take a walk around the exterior and watch out for things like missing roof slates and cracks in walls. BEFORE YOU GO IN Check maps before you go to make sure the area is served by public transport and good roads. Take a look at the area. Is it well maintained? What s the traffic like? Drive or walk around and check out the parking facilities, shops, parks, pubs, restaurants and so on. Ask lots of questions. If the property is second-hand, find out why the property is being sold and how long it has been on the market. If it s been on sale for a long time, there might be room for bargaining. Find out what s included in the sale. If you re buying a house or an apartment, check if there is a Property Management Company involved and what rules and guidelines they have in place and, most importantly, the annual service fee. If the common areas are not well maintained ask to see the accounts. View at different times of the day and week e.g. does traffic change in the evenings/weekends, is there a lot of noise from schools, trains, traffic etc. Verify if you have to pay extra for a parking space. WHEN YOU RE INSIDE Check for musty smells, creaky floorboards, cracked, stained, bumpy or flaky walls and ceilings. Beware of smells used to cover this up or fresh paint. Open and close windows and doors to make sure they are not damaged or warped. Ask about heating and whether the property is alarmed. Test the taps and shower and flush the toilets. Make a list of what may need to be repaired. View the property in the morning and afternoon to see the level of natural light. Remember, empty rooms appear bigger than they are, so try to imagine them with your style of furniture. Don t be put off by dodgy decor. A lick of paint and some imagination can make all the difference. Check to see you understand how the heating and boiler works, if possible ask for a demonstration on how it works. Most of all don t be afraid to ask plenty of questions, take your time and don t be rushed. Happy house-hunting! Karen Hesse House and Home Magazine Steps to Buying Your First Home 10 Steps to Buying Your First Home 11

7 Important Information Warning: You may have to pay charges if you pay off a fixed-rate loan early. Warning: If you do not keep up your repayments you may lose your home. Warning: The cost of your monthly repayments may increase. Warning: If you do not meet the repayments on your loan, your account will go into arrears, this may effect your credit rating, which may limit your ability to access credit in the future. WARNING: YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A MORTGAGE OR ANY OTHER LOAN SECURED ON IT. THE PAYMENT RATES ON THIS HOUSING LOAN MAY BE ADJUSTED BY THE LENDER FROM TIME TO TIME. Note: The above notice in respect of adjustments to repayment rates will not apply during any period when the loan is at a fixed rate. If you or your dependants intend to use the property as a principal place of residence, you must show evidence of mortgage protection insurance, unless you are exempt under the Consumer Credit Act 1995 (you can seek this insurance through us or from other sources). Maximum loan to value of Owner Occupier Residential Properties - 92% of purchase price or valuation whichever is lower. Lending levels are subject to monthly repayment burden, typically not exceeding c. 35% of borrowers disposable income and will vary according to individual circumstances. Loan requests considered on the basis of proof of income, financial status and demonstrated repayment capacity (including capacity to repay at higher interest rates). Loans not available to people under 18. Mortgage loans require to be secured by a mortgage and charge on the subject property. A typical EUR100, year Variable interest rate mortgage for an Owner Occupier residential Property with LTV greater than 80% will have monthly repayments of EUR APR 4.6%. If the APR does not vary during the term of the mortgage, the total cost of credit i.e. total amount repayable less the amount of the mortgage, would be EUR51, The effect of a 1% increase in interest rates for such a mortgage will add EUR55.12 to monthly repayments. Execution and registration of the mortgage deed will involve payment by you of your solicitor's fees, outlays and registration fees. The amount of solicitor's fees can be determined by negotiation with your solicitor, who will also inform you of the amount of the outlays and registration fees. We will charge you EUR60 for executing a discharge, release or vacate of a mortgage. The following is applicable only where the interest rate is FIXED for a period of at least one year: During any period when a fixed interest rate applies, the Lender may agree: (i) to allow full or partial out of course repayment ("prepayments"), or (ii) to convert the facility to a variable interest rate or to an alternative fixed interest rate ("conversions") Prepayments, conversions and early repayment following demand by the Lender will be subject to the payment by you of an early breakage cost calculated as follows: Amount multiplied by (original cost of funds minus cost of funds for fixed rate period remaining) multiplied by remaining term in days divided by 365. Definition of Terms Amount The amount being repaid early or the amount being converted to a variable rate or another fixed rate term. Original Cost of Funds The costs of funds for EBS for the fixed rate period at the time the fixed rate period commenced. Cost of Funds for the Fixed Rate Period Remaining The cost of funds for a fixed rate with a maturity date nearest the end of the fixed rate period. The cost of funds used will be as of 5pm the day previous to the request to calculate the early redemption charge. Remaining Term in Days Remaining number of days left before the fixed rate is due to expire. If the security includes a new mortgage of property other than your private dwelling place, you will have to pay the Bank s solicitor s fees for each property mortgaged as well as your own solicitor s fees, outlays and property registration fees. Lending criteria, terms and conditions apply. EBS Limited is regulated by the Central Bank of Ireland. EBS Mortgage Finance is regulated by the Central Bank of Ireland. EBS subscribe to the Voluntary code of Conduct on pre-contractual information for home loans. A copy of the code is available on request. Information correct as at

8 Handy Checklist Here is a list of the paperwork you'll need when you're thinking about getting a mortgage... For PAYE Employees Current photo ID (passport or drivers license) Proof of address (gas/esb bill) within last 3 months P60 or 3 months worth of up to date pay slips Certificate of income from your employer Bank statements going back 6 months for any savings, investment or loan accounts For Self-Employed Photo ID (passport or drivers license) Proof of address (gas/esb bill) last 3 months 3 years audited accounts verifying your income Confirmation of tax position from your accountant Minimum 6 months recent bank statements for any borrowings, or other accounts held Steps to Buying Your First Home

9 Where Family Counts MTG